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China: deflationary pressure here too

The figures speak for themselves: consumer prices in China are similar to producer prices. This is good for consumers, but a disaster for the banking system, which, as we know from the fiat system, is dependent on rising prices in order to be able to roll over existing debts into the future and keep the credit engine running. It can therefore be assumed that the Chinese will have to accelerate what they have already done and announced in recent weeks, namely further expand the money supply.

#China #deflation #inflation #bitcoin https://nostrcheck.me/media/863f2c555276e9ed738933b0efee6b021042f16e1529dd755704885b87fee183/966d868523730bdd82251c87a5c590dc562abd2b3330330caea6bc42119d1bad.webp

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Discussion

GrumpyGardener 1y ago

Does China care though? Does the CCP have the same banking incentives as our side of the pond?

By being the world's labor camp and setting protectionist policies in place, China's industries produce for the Chinese people. Is forever increasing prices their game?

Ghost of Truth 1y ago

the only thing I know is that responding with further interventions and tariffs is the wrong way forward in the long term. we need a competitive industry that can compete with each other in international markets.

GrumpyGardener 1y ago

But how do you create that industry unless it's nurtured internally and protected by tariffs? The problem that the US has fallen into is that it's left it's people behind in pursuit of cheap labor on the global market.

This makes sense from an international business perspective, but what do you do with the people that have been made obsolete and have an ever increasing gap between inflation and real wages? That's the model that has brought the US into it's debt spiral.

Only way out is for the US economy to mirror China in that regard. Build a US economy for the US people and balance the wage growth with inflationary pressures. When that happens the rest sorts itself out because the relationship between goods and income maintain.

Bottom line, rebuilding a middle class is the only way out for the US. Tariffs are the only effective way of getting there. Anything short of that is a daily rug pull on the middle class.

Ghost of Truth 1y ago

so i honestly see the tariff argument of prohibitive tariffs as a hindrance to growth even for economies that are at an international disadvantage. a society has to commit to applying radical market rules, lowering time preference, working harder to build capital to be innovative, that can't be done with protective tariffs and with a permanently intervening state. the comparative cost advantages also say that a country that has disadvantages in all areas will specialize in where it has the least disadvantages.

GrumpyGardener 1y ago

could be way wrong... but it seems China has done two impressive moves. First they weakened their currency to make it attractive to manufacturers internationally, and then put tariffs in place so that they can maintain an economy built for the Chinese, by the Chinese. I think that's what they're un-interested in the low profit margins. I have nothing to base that on other than observation, but I think that's their goal.

Conversely, we built a system for Wall Street at the expense of our own people. We' been eroding our middle class for 30 years (at least). We've hidden that fact through productivity advancements in tech and cheap Chinese goods... it's getting mighty close to being time to pay the piper... The US is in trouble with the current set-up. It's always small business that solves this problem.

Ghost of Truth 1y ago

When I look at the Chinese economy, two things in particular catch my eye: the collapse of the real estate sector, which is the largest single sector of the global economy. Secondly, the massive indebtedness of both the public and corporate sectors. Thirdly, demographics will have an impact here in the form of increasing deflationary pressure, which the fiat banking system will not be able to withstand. We will see how this plays out in the medium term.

GrumpyGardener 1y ago

when you say demographics, do you mean the one child policy disaster?

And yes, agreed. they gave a number of problems when viewed through the eyes of traditional banking, but that's why I question. Do they even care? Seems their game is different because if the Chinese are anything, it's certainly not dumb. I genuinely don't know, but the macro fascinates me.

Does the collapse of these sectors really affect anything other than global investments in China?

Ghost of Truth 1y ago

yes so by demographics i mean the general demographic trend, which has certainly been influenced by one child's policies, but is a fundamental trend in developed economies. as for the real estate sector, it once accounted for about 7% of the global economy at its peak and was very crucial for capital flows and for commodity markets.